For now, Netanyahu is pledging to court more centrist partners, believing a larger coalition will be more stable and better capable of addressing the nation's needs.

"It is inconceivable that the most challenging country in the world should suffer from instability and weak governance," Netanyahu told a welcoming ceremony for the new parliament on Tuesday. "We need stability to deal with the quality of living for the citizens of Israel, but also to guarantee something far more superior and important."

In his comments, Netanyahu laid out an ambitious agenda: He vowed to reform the country's compulsory military draft "in a way that will not tear this nation apart" and to find ways to reduce Israel's high cost of living.

He said Israel must face "new and mounting threats," a reference to Iran's suspect nuclear program and the turmoil sweeping the region. Netanyahu also pledged to pursue a "secure, stable and realistic peace" with the Palestinians.

Despite Netanyahu's appeals for unity, any one of these issues could rip apart a future coalition. Ending the country's contentious system of giving out draft exemptions to Jewish seminary students would alienate potential ultra-Orthodox partners. Failing to do so would drive away centrists like Lapid, who made the issue a centerpiece of his campaign.

Negotiations with the Palestinians are just as contentious.

Peace talks remained frozen during Netanyahu's just-completed four-year term, and he is under heavy international pressure to get negotiations back on track. When President Barack Obama visits in the spring, he can be expected to increase the pressure on Israel to come forward with an initiative.

Restarting peace talks with the Palestinians will likely require new concessions by Netanyahu that would be opposed by his hard-line base of support. Netanyahu's own party is dominated by lawmakers who reject concessions to the Palestinians. A likely partner, the pro-settler Jewish Home, even advocates annexation of large parts of the West Bank, the heartland of any future Palestinian state.

Yet Lapid, among others, has said he will not participate in a government that is not conducting serious peace negotiations.